Posted
by
CmdrTacoon Monday February 04, 2008 @11:55AM
from the well-good-for-them dept.

NewsCloud writes "Microsoft makes products in Washington but records software sales to PC makers and high-volume customers through an operation in Nevada, where there is no corporate tax. So Washington has missed out on more than half a billion in taxes; revenue it could use for badly needed infrastructure needs — such as the needed replacement of the 520 bridge which connects Seattle ... to Microsoft. Reported by Slashdot in 2004, the numbers have increased with the company's growth to approx. $76M in savings last year alone. The author questions the legality of the practice given Microsoft's 35,500+ employees and 11.2 million square feet of real estate in Washington state."

Do I hear someone call for "Small government" ? This is what happens when the sheeple are being led by corporate hacks calling for small government: no checks on the corporations, while people are starving on the streets.

Second: So-called "democratic" governments are only "accountable" to the majority vote, which is merely a form of "might makes right", this time in the form of numbers. The GP was clearly referring to accountability to justice, e.g. under common law, where anyone who causes another person harm is liable for the damage. No government, of any sort, considers itself accountable in this fashion; in fact, the definition of "government" can essentially be summed up as: the one group wh

Small Government People know that you can not have small government with corporations. Corporations are not natural entities but protected entities created by government regulations. A small government would eliminate the corporation. Not the business, just the protected status. Corporations only enjoy their protected status by the largess of government.Look at your city, your county, your state. Almost all corporations.

People like you need to realize that it isn't the "big business" mentality, it is the fa

I am not making that claim, Microsoft is indeed benefiting from free roads, free education providing a better labor supply, and - most of all - patent and copyright laws. So I'm not saying Microsoft is responsible for all the profits made in the corporation, far far from it.What I do claim is that they own their profit, regardless of "effort". If I build something with someone's help, I don't owe him anything just because he helped me, but because we agreed on compensation beforehand. There is no valid cont

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract. You eat the food, you pay the bill. With government services, there is the same implied contract. If you don't want to pay the bill, don't make use of the services. If you don't agree to pay taxes, go live somewhere else, you have no right to live here.

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract.

I see things like this written all of the time on Slashdot. It usually doesn't come up in stories about tax, but usually ones about EULAs.

When you place an order for food, there is actually a contract. A valid contract requires: offer, acceptance, consideration and assent. Absent some extraordinary situation, the moment the restaurant starts making the food you've ordered, there's a contract. You're obligated to pay. Dine and dash is a sort of breach of contract. It's also conversion.

An "implied contract" is somewhat of a different beast. It's more of a legal fiction that prevents someone from knowingly obtaining the benefit of another's mistake. E.g. a court might imply a contract if you eat the $1000 meal meant for another table and then try to say that you're not going to pay for it because you only ordered a diet soda.

And, as it relates to taxes, a contract analogy is not a very good one. Lots of people don't pay taxes and yet get the benefits of the tax system. Moreover, a number of people pay more taxes than the value of the actual benefit received from them. There's also no way to reject the benefit since moving elsewhere is not usually a viable option--in a contract, this might be an example of duress.

YOu make a good point, but consider this: would washington be better of without Microsoft rather than with? I guarantee you not. There would be a lot less people earning high wages, and they all pay taxes. Washington does pretty well out of Microsoft as it is.

Yeah, so what. Why is every big bank in the U.S. run out of South Dakota and Delaware? Because those states have lax banking laws. Why are movies made in California? Low tax on entertainment. Duh.

If Washington State decided to levy M$FT they would be driving out one of the largest employers, and those employees DO pay income tax. Not to mention sales tax on everything they buy. Lots of companies are in Nevada to not pay tax. Guess what, there wouldn't be SHIT in Nevada if they had the tax! So, states do things that help them out, and companies do also. This is a NON STORY.

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract. You eat the food, you pay the bill. With government services, there is the same implied contract. If you don't want to pay the bill, don't make use of the services. If you don't agree to pay taxes, go live somewhere else, you have no right to live here.

Cute. Are you just trolling, do you really believe this drivel, or are you just hoping no one will call you on it?

There certainly is a valid contract when you eat into a restaurant. I can only assume that you meant there is no written contract. The fact that it's implied makes it no less valid.

When I walk into a restaurant, I do indeed agree to an implied contract that I will pay for whatever it is that I order. This is a contract between equals. I'm free to engage or not engage in the transaction. So is the restaurant.(1) If I don't like the prices on the menu, I can decide not to eat there. The situation is far different with government services.

I'm not free to refuse to engage in the transaction. Ask the many people who have either been fined or incarcerated for failure to pay the proper taxes or fees. I can't simply say "I don't want what it is you're selling, so I won't use it and therefore don't have to pay for it." I'd be more than happy to give up all rights to many government services, and to pay only my fair share of those services I actually use - such as public road construction and maintenance. That option doesn't exist for me, and it doesn't exist for Microsoft.

You state that I "... have no right to live here..." If that argument is valid, then I have no rights at all. Freedom of speech? Of Religion? Of anything else? "We don't like that kind of talk around here. If you want to talk like that, go live somewhere else. You have no right to live here." "We don't worship like that around here. If you don't want to worship our God the way we do it, go live some where else. You have no right to live here." Any right whatsoever can be trumped with "Do it the way we tell you to do it or go live elsewhere."

(1) For the peed ants, there actually is legislation which interferes with the right of the restaurant owner to practices his freedom of association. Refuse service to the wrong person and you may actually be facing a law suit. Such violations of freedom of association, while technically making the restaurant not entirely free to refuse to engage in the implied contract, doesn't really affect this situation.

Contracts require three elements: offer, acceptance of offer, and consideration. All three are in-place when you go to a restaurant:
Offer: The restaurant provides you with a menu, which includes prices
Acceptance: You reviewed the menu and placed an order for specific items.
Consideration: The restaurant provided you with food, expecting you to exchange cash.

Don't gimme any of this fictitious "implied contract" or "social contract" crapola.

You can look at the services provided by the US, and the amount it will cost you in taxes, and if you don't like it, you can leave. Exactly like the restaurant scenario. It is the same situation, except in the minds of people who would rather reap the benefits of living in a first world country without paying for them.

"There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract."

Err...bad analogy. There is no 'implied contract' if you dine at a restaurant. If you do a 'dine and dash' and get caught, you'll be charged with theft, not with 'breach of contract' I can assure you.

:-)

Microsoft broke no laws here, in fact they were operating fully within the l

So you have the right to profit off of my work, do you? Because that's what you're doing when you don't pay taxes. We contribute to the public good through our taxes, paying for positive externalities that everyone benefits from. I'm not telling you to leave, I'm saying you have a choice. If you don't want to pay taxes, don't take any of the benefits I pay for or you are stealing from me. Do you think that's fair?

Competition. That's the key. But between states.
When a business decides to raise prices unjustifiably, what do you do? You go and buy from someone else.
When a state decides to charge taxes that are above what's reasonable, what do you do? You normally have only one recourse: move your operations to some other state.
If the states complain that companies can move around their operations, it's because it is the loophole in their abusive scheme. It is the only safvety valve in the system and they would like

Very true...corporation management in Nevada is a huge business down here in Vegas...I have friends who are "Presidents" or "Officers" of dozens of corporations who bounce from empty office to empty office throughout the month, because there is some kind of requirement around having to spend so much time per month on site. It's not unique to MS by any means. All above board, just jumping through weird loopholes created by Carson City.In addition, I would bet that Microsoft is also not a Washington State cor

I didn't realize that the education I got from the government, for which my parents paid by taxes, made me the property of that government (since I cannot be parted from that education without killing me). It's only a short logical jump from saying that the employee's education obligates the employer to saying that it obligated the employees themselves and therefore they may not leave the jurisdiction that paid to have them educated. I seem to recall the USSR, may it rest in pieces, used that argument.The f

Absolutely not, they already pay WA state taxes, the article is misleading. MS does pay WA taxes, and presumably quite a bit. They pay property taxes on the land they occupy and sales tax on anything that is purchased for the business.

People who purchase MS software or services have to pay sales tax on those transactions and anything that MS sells online is also subjected to WA tax for anybody that lives in the state. I don't believe that MS is required or really should be paying more taxes than they are presently to my state.

I haven't seen the figures themselves, but it doesn't matter where the sales are recorded, the amount of taxes that corporations can be taxed here are extremely low compared with the money that MS products bring in through sales tax. We're talking 6.5% base sales tax compared with corporate taxes of 0.00484% for gross manufacturing receipts, 0.00471% for retailing and 0.015% for other services.

The money just isn't that large compared with the additional sales tax, gas tax, property tax and the taxes paid to the state by their employees.

...should Microsoft pay taxes on the profits they make in selling their software? If so, where? If not, why the hell not?

Leaving aside the issues of libertarian principles, of the legitimacy of taxation in general, and of how much obligation a public education places on the individual and anyone who hires him, we have the issue of traditional goods as opposed to those with near-zero margin costs. Do we really want to establish a precedent where every copy of software sold is taxable by the state where the

Corporate taxation is merely a form of double taxation, which is counter-productive to the state anyway.

You've been taken in by right wing propaganda. Republicans trot out the "double taxation" argument any time they see a tax that might make rich people slightly less rich. They do it for the estate tax and corporate income tax. There is no dividing line where flow of income starts and ends. All income taxes, capital gains taxes, sales taxes, gift taxes, and estate taxes are taxes on transfers of wealth.

I earn a salary and pay income taxes. I then use my income to buy a toaster and pay sales taxes. Double taxation! Then the store pays taxes on its income. Triple taxation! Then the store employees pay income taxes. Quadruple taxation! And then the store employees pay sales taxes on their purchases. Quintuple taxation! And so on. It's a totally meaningless argument.

Now, I am not a fan of taxes by any means, but I dislike free riders even more. Using your logic, it would be ok for all of Mircosoft's employees to declare themselve personal corporations in the state of Nevada, and then claim their wages as revenue of such a corporation.

Technically, yes. Of course, if they want to keep living in Washington, they probably own or rent property there. This property can be subject to property taxes. If they want to eat in the state of Washington, they probably buy food. This

The problem with taxing consumption over income is that it puts a heavier burden on the poor. The poor have little choice but to spend most of their income on goods, almost as soon as they earn it. The middle classes are usually not much better off, though they can sometimes squirrel away savings. The wealthy have a lot more flexibility with their money, and can defer consumption indefinitely, move money off-shore or into other currencies, etc. It is also easier to adjust an income tax so that the poor don'

Impossible? No, certainly not. I've read about schemes whereby people in lower income brackets can be reimbursed for a portion of their consumption tax. It's impossible to be completely fair with a simple flat consumption tax, sure, but, with some added complexity, it can be made more fair. The question is just whether such a system is simpler than the current income tax mess we have right now. If done correctly, I think it could be. But it'll never happen, at least not in the US.

Would Washington rather MS move their operations to Nevada and lose the tax base of all the employees? This situation is actually a good argument for getting rid of corporate taxes. Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.

Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.

Or they would move the money offshore. Or they would move to give their top executives raises and stock options. Or they would throw it on the big pile of money they're offering to buy Yahoo. Or they would pass that money on to shareholders at the end of the quarter. Or any one of a hundred other things they could do which takes the money out of the state.

All moves which deprive the residents of Washington money they need for social services. Do you think that Microsoft is required to spend money in their home state? That they will do it out of the goodness of their hearts? Their job is to make money for the shareholders, and unless you specifically tax them, then there is no guarantee that any money Washington gives them will be reinvested back in the state.

They are in Redmond because it has the infastructure to support them. The telecommunications, roadways and educational system to supply those tens of thousands of employees. Nevada, by contrast, cannot supply these (sorry nevada, you're a great state, but your infastructure is horrid). For microsoft to do such a move would be to cut off its nose to spite its face.

There is a reason why the top performing companies are found in areas with the highest tax brackets. Those territories, which tax for the needed infastructure, are the ones which can support businesses of Microsofts size.

Obviously you don't live in Washington... Microsoft (and Boeing) each PAY millions of dollars when expanding their campuses FOR things like increased roads, transit, power, and the such. They PAY those costs right up front, before or during construction (with the requirement that the infrastructure be built and completed prior to signoff of the new construction).

Additionally, because of "community needs" and "environmental impact" and "public awareness" campaigns, Microsoft and Boeing pay MILLIONS to build parks, schools, and other government-specific projects MILES away from the construction, just to get their permits approved.

Microsoft PAID for the overpass across 520 when it wanted to join its two campuses. It PAID for the Metro transit center in front of the Redmond campus. It PAID for widening 40th Street. It PAID for the rework that's happening on 150th. Cash up front.

This is a case of a State out of control. Washington's budget has increased 33% in the last 3 years alone. Not promised outlays, actual CASH BEING SPENT. We're going from a $1.5 billion dollar surplus and $2 billion dollar rainy day fund to $600 million dollar deficits and no rainy day fund.

We have the HIGHEST GAS TAX in the nation. That gas tax is supposed to be dedicated to roads. Yet we still have floating bridges that are at risk of sinking with each storm, and a viaduct that carries half the North/South transit through the city of Seattle yet is in danger of imminent collapse PER THE STATE'S OWN EXPERTS.

Yet neither of these infrastructure problems - which were to be addressed by the latest 9 cent per gallon tax - has been started. We're still arguing about whether to just tear them down and not replace them (where did the money go?) or replace them with structures that carry FEWER vehicles, when our population is increasing.

We have an out-of-control L&I system. Woe be to you if you have a warehouse or shop and the State knows about it - EVERYONE that can walk into the warehouse can be considered "high risk" for your L&I costs, regardless of their position or the use of that warehouse.

Unemployment? I ran a business for 10 years in this State, and never ONCE had an unemployment claim. Not one. Employed over 80 people over the years, never ONE claim. Yet every year my unemployment tax rates would increase by 6-8%.

We mandate HUGE income to the State by having the highest minimum wage in the nation. And of course, that means the State gets more income because their income is based on spending, gross receipts by businesses (which must increase when the mandatory wages increase), and those same L&I costs (which are a percentage of your wages).

No, taxation is not the problem - the State's budget is growing faster than the wealth or income of the State's residences. Record budgets are being pushed through with taxation growing 2-3 times that of the wealth of the State... Well what's going on?

Spending - it's up 33% in just 3 years. Oh, and that doesn't include the UNDERFUNDING of the State's pension plan. Or the spending of the rainy day fund. Both of those are "off book" items...

We're spending over a billion dollars a MILE for a light rail system that runs at grade. And cannot climb the hills of Seattle. And originally wasn't even going to go to the airport, but changed because of overwhelming public outcry. The existing example spur - the South Lake Union Trolley (yes, it is actually called the SLUT) - has had 3 train-car accidents in just 3 months, bringing it to a standstill for hours.

This State has seen property taxes rise on average at 15% per year for the last 5 years. And now that it's looking to slow down to only 3-4% per year, the State is figuring out how to increase the taxation rates to bump their revenue intake up.

This State is all about take-take-take, and what YOU can do to contribute to it. Competition is not allowed - no school vouchers, private tollways are illegal, private ferries ar

The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base. Those 35k are probably just the people who work for M$. There are probably lots and lots of other Washington residents whose primary income derives from Redmund.

Microsoft isn't going to leave Redmond - just accept it. Consider what it would take to relocate to someplace else: you'd have to build an entirely new campus for 35k+ employees, then you'd have to convince them all to come with you sight unseen, then you'd have to hire thousands of new employees to replace the ones who didn't come with you.

If taxation and cost of doing business were the deciding factor of where a company locates, Silicon Valley would not exist, and the World Trade Center would be in rural Idaho.

Ahh, but they wouldn't have to move 35k+ jobs, only (Total/2) + 1, depending on what the formula is going to be for determining where a corporation gets to put its headquarters.Still, I don't think it is workable to have the states determine where a companies HQ is. What if two states both claim the HQ? What if the employee count goes up and down each year? I'm sure Texas, California and New York would have no problem telling company X that they now pay state corporate taxes. Although I don't think

I'd argue that businesses locate in low-tax areas, and as those areas attract and grow new businesses, they increase the taxation, assuming that if they keep the rate of increase low enough, the business will simply suck it up and pay the higher rate than pick up and move.

Check out Idaho - businesses are relocating there like mad. Likewise Nevada and Wyoming. High tax areas like California, Massachuessets, and Michigan are leaking businesses because the taxation has gotten too high.

Washington is unfortunately following the CA/MS/MI model, not the ID/NV/WY model. It's already caused Boeing to relocate their headquarters (taking with it a substantial chunk of change)...

Looking at the Microsoft employment opportunities/open recs, there's no question in my mind why growth out-of-Redmond is much greater than in-Redmond. Cost of doing business - hire your employees in other areas where it's more affordable and let the local employment stagnate or fade away. That's how you move a massive high-tech information company.

Boeing is in a tougher place - they have physical plants and tools that are expensive to relocate. But Microsoft? Give it 10 years and you'll find the majority of Microsoft employees will be OUT of the State of Washington. Bet on it.

The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base.

Washington has no personal income tax, so the state would only stand to lose sales and property taxes. If MS is avoiding $76 million in annual corporate taxes, that's $2171 for each of their 35,000 employees. How much sales and property tax are those guys actually paying?

A corporation has a financial duty to avoid paying unnecessary taxes. If you don't like the way those "fat cats" (I notice rabble rousers use that term a lot) get out of paying taxes, talk to the government and have them close the loopholes. More importantly, not that every dollar Microsoft pulls in is taxed _multiple_ times by the time it makes it into the shareholders' pockets. The fact is that it's a myth that corporations are pulling one over on the government, corporate taxes are a little silly since the money _is_ taxed before it goes into any individual's pocket.

The main reason that corporate income taxes are relatively low is because corporations are taxed on their profit, whereas individuals are taxed on their earnings. A company can easily bring in $100M in revenues, but only make $5M profit, which is then taxed at ~35%, yielding $1.75M in taxes. The other $95M is also taxed, just not dir

--Basically, Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market last year (fiscal year ended July 1999), tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive.--Corporations pay taxes on their own income (generally 35%), but money they pay out in salaries to employees is deductible from the corporation's income. Since granting options to employees results in taxable income to those employees, Microsoft gets to deduct that taxable employee income from its own taxable corporate income, and that's where Microsoft got a tax-free $3.1 billion in cash in fiscal 1999: "Stock option income tax benefits."--

Add up the actual amounts involved and account for the dilution in share value and you'll realize that no one is cheating anyone else.Employees exercising stock options pay taxes on the value of the benefit they receive just as if it were income through wages. The employer deducts the value of the benefit just as if it were income through wages and the net value of the corporation is reduced by the same amount just as if it were income through wages. Stock options allow you to tie that income to the stock p

I hate Microsoft as much as the next guy (okay, maybe not around here, but I really really hate them!), but why shouldn't they structure their corporation to reduce the tax burden? Just be glad it's Nevada and not Belize.

Aye. The Danish branches of Coca-cola and McDonalds for example continuously post negative turnovers even though they're doing _quite_ well here. As for Coca-cola, they simply purchase syrup from the US corp. at extremely inflated prices to avoid taxation.

I hope that you and Microsoft are equally cheerful about all this when the 520 bridge capsizes with a ton of Microsoft employees on it. Or will that then be the state's fault somehow?

I tend towards libertarianism myself, but the article makes an excellent point. The 520 bridge is a crucial piece of infrastructure that Microsoft and its employees benefits greatly from the existence of. Do you have a reasonable proposal for how to pay for it? If you think it should be a privately owned toll bridge, I wil

I for one cheer for anyone protecting money from the prying hands of the State.

Ah, the refrain of all Libertarians. Never mind that there are legitimate responsibilities for both tax payer and government. Does Microsoft build and maintain the roads to-and-from their employee's homes and their distributors. Does Microsoft pay for the infrastructure that pushes electricity, cable, and water lines for them? Does Microsoft provide police and fire protection for them? Nope, that's what your taxes are for

Good for Microsoft! If I could do the same to avoid paying the portion of my taxes that go for welfare-state bullshit (which is pretty much EVERYTHING except for the Military and Law Enforcement budgets), I would. In a heartbeat.

If Washington state makes a move to try to get this income, MS should pick up and move it's entire operation to Nevada. What would Washington State do then?

Defense accounts for 21% of the federal budget. Social Security, Medicare, "Safety Net" Programs account for 49% of the federal budget. 9% is interest on debt and 21% is "everything else." (According to cbpp.org) DoJ is likely in that "everything else" category, and accounts for.7% of the federal budget. (According to DOJ press release of today.)21.7% is _not_ the majority of the federal budget by any stretch. Even if you don't sort out the entitlements from the "everything else" category, Social Secur

When I had my retail store, we moved literally 3 miles across a State line because of a sales tax differential of nearly 4%. That's significant, when many of our items were $500-$1000, meaning a savings to the consumer of $20-$40 in taxes. Even funnier, the county/state with the lower tax rate had BETTER public facilities and police attention (the store in the old State had regular robberies and theft), and my customers had a 5 minute longer hop to get there.

We've talked repeatedly about moving out of our State and leaving some customers behind if our State decides to start a labor sales tax. It's a terrible idea, as more taxes don't mean more income (and neither do less taxes necessarily) for the State. It's a VERY complicated "invisible hand" situation.

I appreciate when companies find loopholes, because it gives me hope that I can use them, too. I hate W2s, as 1099s offer many more tax benefits. I've seen many friends give up their stable W2 jobs to move into 1099 contracting, and see their income double, but their tax share not move up as much. When I heard Haliburton was moving offshore, I investigated it and found that there are tons of savings to do so, even if your primary business is still in the States. It makes sense.

Yeah, Microsoft will take heat for this, but the reality is that small and medium sized business owners should do everything in their power to find the least-regulated economies to operate out of. I love seeing companies move out of California, employees and all, and hitting States that so far have not shut down the engine of business, thinking that the State can help the poor when in fact it is jobs, not entitlements, that help the poor.

Basically, the dispute is whether the "product" you purchase is a chunk of software hand-crafted for you in Redmond or a license generated for you in Nevada. Seems like the "its not stealing its copywrite infringment" crowd ought to be 100% on Microsoft's side on this one, no?

I guess how shady the accounting is depends, in part, on how large a presence Microsoft has in Nevada. Is MS shipping DVDs of Windows and Office from some warehouse in the desert? Do they have servers based there that distribute authorized soft copies to OEMs? Are their sales and volume-customer relations based there?

The other major business of Washington state - Boeing - flies their planes just outside the U.S. territorial limit offshore to sign the transfer papers with international customers so that they won't have to pay tax. Should we complain about them too?

It is not like Washington isn't getting a cut out of MS. With 11.2 Million square feet or real estate, think of the property taxes? With 35,000+ employees, think of the payroll taxes?

Seriously, please don't tell me everybody on Slashdot is naive enough to think that companies like Red Hat, SUSE and Ubuntu aren't working the tax system either! Companies from a one man show to an MNC use this system to pay the least amount of tax they can. Nevada and Delaware have long maintained favorable tax treatment of corporations exactly for this purpose. If Washington wants in on this action, they can offer the same incentives to encourage MS to claim those profit in WA.

That Microsoft's behavior isn't unique in any way, shape or form. That what microsoft does is standard operating procedure for all mega-corporations.

Paying taxes in the state with the lowest corporate tax rate and forming corporations in Delaware is done for the same reason. It's the best deal.

If this is outrageous to the submitter, then I hope he never discovers how most electronics firms with an office in the U.S. work.

As an FYI, they are set up as subsidiaries that "buy" their product from the most attractive exporting/manufacturing office from some other part of the world of the same corporation. The U.S. office then operates at a perpetual loss (paying less tax) by hiding the income generated as the cost paid to "buy" the goods from some other part of the world.

Bridges are here to allow people to travel, and people pay taxes. Tens of thousands of people spend comfortable incomes in Washington and lots of sales tax on their spending thanks to Microsoft, that should be enough to keep the infrastructures that support these people.

Note that this is a complaint from the State of Washington (where I reside when in the US), the ONLY State that has the completely regressive and oppressive Business and Occupation Tax. A State tax on GROSS receipts. Yep, have $1,000 in revenue, but because you're a startup, or have a bad quarter or whatever, you lose $1,200 but STILL get the "luxury" of paying tax on that $1,000!

Ignore this story - Washington is taxing itself into oblivion. Boeing moved their corporate headquarters - and most of their taxable profit - to Chicago over the taxation and treatment of business in this State. The ONLY things that is keeping Washington alive right now are:

1. Agriculture. Hard to move a farm, so they're stuck. Of course, our State wants to breach all the dams and eliminate the irrigation systems, which would kill these businesses.

2. Boeing. Already moved their corp headquarters, and unfortunately for Boeing, the physical assets here - buildings, equipment, and people - are so huge that you can't afford to move them. But more and more work is shifted outside the State...

3. Microsoft. Faces the similar situation with Boeing, because of the size of the campus and people. Stuck for now, but does more and more outside the State.

Washington is screwed. It has the highest gas tax in the nation, and still hasn't repaired road damage from the 2001 Nisqually Earthquake. The legislature and governor raised the State budget by 33% in 3 years, and now projects deficits left and right, yet it's also decreased MANDATORY funding of the State employee's pension fund. And now it wants to put the screws to Microsoft...

This is a textbook case of high taxation modifying the behavior of the taxed. If Washington's tax rates weren't punitive for these sales, there wouldn't be any incentive for the company to be incorporated in Nevada. This is a common corporate practice, and demonstrates the necessity of small laboratories of democracy, aka, states. Washington is seeing how Nevada's tax code is modifying the behavior of Microsoft, and Washington has the choice to modify their tax code or continue pursuing their own version of it. It's not Microsoft's fault for playing by the rules to maximize profit.

This is a textbook case of high taxation modifying the behavior of the taxed. If Washington's tax rates weren't punitive for these sales, there wouldn't be any incentive for the company to be incorporated in Nevada. This is a common corporate practice, and demonstrates the necessity of small laboratories of democracy, aka, states. Washington is seeing how Nevada's tax code is modifying the behavior of Microsoft, and Washington has the choice to modify their tax code or continue pursuing their own version of

Nevada may have lesser public services than Washington, or higher non-corporate taxes. Either way, Microsoft and it's employees are enjoying privileges in Washington that they've skipped out of paying for, placing more burden on Washington's other residents.

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

And, as you file your own tax returns this year, I'll bet you carefully record each internet transaction from out of state, ensuring that you pay full taxes even though it would have been easy to avoid it? Of course, your charitable deductions will be paid at the lower rate you really know your junk was worth rather than the higher "standard rate" you know you can get away with? Similarly, when you realize your itemized receipts don't add up to as much as the standard deduction, you'll still take the lower amount you know you really deserve? You'll also stop using lower rate credit cards issued out of Delaware in favor of higher rate ones from your own state?

Sure, you could be saving money on your own taxes. But won't anybody think of the children in your own state who are in cramped classes because there aren't enough tax dollars. Thank God for people like you who make a point of paying every dollar they can, rather than looking for the best possible savings.

When an individual figures out ways to avoid paying taxes - or paying as little as possible - it's considered frugal. When a corporation does it, it's evil?

Actually, I live in Canada, Alberta to be exact, and when I order things from out of the country I DO pay taxes on them. Every single item. When I buy items outside the province I often have to pay other province's sales taxes as well, even though technically I'm exempt.I can assure you that if I managed to somehow creatively avoid declaring a third of my taxable income and the government found out about it I would at the least be assessed some massive fines. If I'd done it for ten years I expect I'd jus

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

Why don't we really punish Microsoft? Let's kick them completely out of the USA! If the taxes aren't good enough for Washington, then Microsoft isn't good enough for Washington and therefore the USA. We should make them relocate to India and fire all their American employees! That would show those bastards. Then the next time some evil company wants to hire American workers while reducing their costs of doing business, they'll think twice because we took a stand for more taxes and less profits.

I for one will not stand for good paying jobs in the USA. Any candidate that encourages more tech jobs to move to India has my vote!

Amusingly enough, MS has paid a fair bit into King County municipal infrastructure issues. They bought a bigger fire truck (in exchange for being allowed to build a building taller than 4 stories). They built a bus transit center. I beleive they've had a part in paying to get bridges widened and other traffic improvements near the MSFT campus.

The MSFT employee base does a hell of a lot more for King County than the other way around.

WA politics are horribly corrupt and stupid.

Former Redmond resident, Current MS employee (in Fargo, ND, where the local government is much less stupid)

As an MS employee and shareholder, I hope we continue to diversify away from the Redmond campus. It is extremely expensive and the business climate in WA is unstable and increasingly hostile. The overwhelming majority of MS employees are transplants from elsewhere.

The nice thing about markets is that socio-economic conditions are a market also, and as US cities get stupider and stupider, they'll lose business and "lose" in the market place. Hopefully corrections occur before there is too much uncomfortable displacement for all parties.

But you do have a sales tax. 8% if I am not correct. And those employees buy stuff, they pay property taxes, gas taxes and I bet they are even allowed to vote. I would bet these are high paying jobs who's money trickles down to the retail sector and pays for those jobs there as well.

Let's do away with taxes. And, we can do away with all the things taxes pay for: the education system that trains Microsoft's employees, the roads that allow the employees to get to work, the police that help protect Microsoft from the roving bands of rabid cats, the standing militia that protects Washington from invasion by Canada. (Those bastards covet Washington, and are just *waiting* to invade.)

Corporations benefit from -- nay, depend on! -- public infrastructure. Public infrastructure costs money. It's been proven time and again that private interests cannot provide neutral, equitable infrastructure at a reasonable price. Taxes are necessary.

Now, taxing both corporations and individuals seems a bit of double-dipping, I agree. Tax the corporations, and let the individuals keep their wages. Politicians would end up with a lot more votes that way (though a lot less money through corporate sponsorship and whatnot).

Corporations never pay taxes. Their customers do, and they don't even realize it. That's why I believe we need to eliminate ALL corporate taxes at all levels. Each individual person should be able to calculate to the penny how much they pay the government. How much of the cost of your last Windows license went to Uncle Sam? Don't know, do you?

Tax the corporations, and let the individuals keep their wages. Politicians would end up with a lot more votes that way (though a lot less money through corporate sponsorship and whatnot).

Unfortunately, it is very difficult in practice to "target" a tax to hit a particular demographic group. This is the same reason why it makes no sense for the Social Security Administration to talk about the "employee's share" and the "employers share". Both shares are paid by the employees (i.e. their wages are lower than they otherwise would be if the employer wasn't paying "their share"). It is a frequent mistake here on Slashdot to ignore what economists call the incidence [wikipedia.org] of a tax. In fact, it is often the very people whom the tax advocates propose to help who are ultimately hurt the most by new taxes.

Corporations benefit from -- nay, depend on! -- public infrastructure. Public infrastructure costs money. It's been proven time and again that private interests cannot provide neutral, equitable infrastructure at a reasonable price. Taxes are necessary.

The government doesn't provide neutral equitable infrastructure... just compare roads, schools, public services etc. in any wealthy neighborhood and any poor neighborhood, and you will see that extreme inequality is a fundamental part of the whole system.

Tax funded infrastructure is a way to tax the working poor in order to provide for the needs of the middle class and rich.. not that I am complaining - A lot of poor single mothers had to take on second jobs so that the government can subsidize my dirt che

Even the Lauffer Curve, beloved of Reagan, says that taxes lead to more productivity. While 100% is bad, 0% is also bad. The right number is in-between

The problem is that a lot of leading political figures on the left believe that 50% is the right mark, and we Reaganites believe that's a bit too high!

0% being useful assumes investment in useful things like roads and bridges that actually improve the business climate. If it doesn't improve business, which does actually include quality of life and nationalis

That's not what the Laffer Curve says. It says that tax revenues are optimized at a certain point. Taxes always* have a negative effect on productivity, and that has to be considered against the potential increase in tax revenue that an increase in the tax rate would otherwise bring.

* Specific uses for tax dollars can increase productivity, but that increase is usually not as much as the productivity that a firm could gain by just spending the money itself.

Even if the curve is smooth, there's no clear evidence on where the optimization point would be.

It is true, however, that any production that goes into government finances can't go anywhere else at the same time. That doesn't mean it's necessarily a bad thing to have taxes, it's just that the government has to use the money for something worthwhil

Well, don't forget that Microsoft is only able to create those profits because the government granted them temporary market monopoly (copyrights)... It's a trade - something(copyrights) for something(taxes).

Warren Buffet is hypocritical scum then. Isn't he the moron complaining because he didn't pay enough taxes and that his secretary paid more than he did as a percent, and wasn't he the liberal rich freak saying the rich should pay more taxes, even though they actually shoulder the main tax burden in this country?

They're both incredibly retarded, then. Do they know they can do this thing called "donate" their money? If they want schools to get more money, they can give more money to schools. If they want the "working poor" or homeless to have help, they can create programs or donate to existing programs.

Instead, they want an inefficient middle-man to take more of their money, waste some huge percent of it, and trickle down a few dollars to people who "need" it? They are both complete and utter idiots, I don't

It's not a tax break as such. It's transfer pricing, or a version of it. It's one of the oldest tax avoidance tricks in the book. Make your product in one jurisidiction, sell it to a subsidiary in a lower tax jurisdiction at cost (so booking zero profit) and have that subsidiary sell it on at the actual retail price, thus keeping your profits out of reach of the taxman in the higher tax jurisdiction.

Most jurisidictions' tax codes have rules which are designed to prevent this (most commonly by requiring go

Hogwash. The corporations aren't paying any more in salaries than they have to. It's their customers who pay their taxes, not their employees. Did you get a raise the last time your employer got a tax cut?And they're going to charge their customers as much as they possibly can as well.

We do NOT have the highest taxes. Have you seen what they're paying for gasoline in Europe? That's mostly tax.

As to "paying more than 100%, well gee, I thouhgt I was bad at math! A 100% tax rate would mean that all gross recie